Shares in domestic disaster insurer Homeserve shot up 5 per cent today after the group said its customer numbers were falling more slowly than expected.

The firm has been beset by woes in its British business after being accused of potential mis-selling.A two-year probe by City regulator the Financial Conduct Authority landed the group with a £34.5million fine at the end of last year.

The company used to have 3million British customers, but this began falling significantly after it cut its sales team in the wake of the investigation. It had been expected that customer numbers would bottom out at 2million.

Emergency eases: Homeserve, helmed by chief executive Richard Harpin, said its customer numbers were falling more slowly than expected

The group said: ‘Customer numbers at 31 December 2013 were 2.1million and we now have greater confidence our UK business will stabilise customer numbers at a level of at least 2million.

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‘While currently in the peak renewal period, recent product enhancements and improved customer satisfaction are delivering a good retention performance and we expect full year retention to increase from the 81 per cent reported in the first half of the year.’

But the firm warned that its annual profits per customer would be lower than expected after customer service costs and the cost of its re-vamped sales teams would be higher than planned.

Homeserve shares, which have risen by a third over the last 12 months, climbed 14.3p higher to 321.3p by lunchtime. But they are still far below the 500p above which they were trading during 2011.

The group was heavily criticised for setting aside a £6million provision to cover its mis-selling fine last spring – which analysts believed meant the investigation was coming to an end. In reality the probe lasted more than 6 months more.

Founder and chief executive Richard Harpin, who commutes to work in his personalised helicopter, maintains that he was right to wave the flag once he discovered potential for mis-selling in late 2011.